October 26, 2018

Valens Research Weekly Equity Idea Highlight for October 24, 2018 – Winnebago Industries, Inc.


This week the Valens Research team highlights our most interesting equity insight from across our tools and our analysis.

WGO likely to drive strong returns, as current low market expectations do not recognize
age-wave and company strategy factors, strong management alignment, and growing management confidence that are likely to justify upside

After WGO’s stock sell-off, current market expectations for WGO are excessively pessimistic. Markets expect UAFRS-based (Uniform) ROA (ROA’) to only reach prior cycle trough-levels going forward, even as analysts are forecasting sustained ROA’ improvement, in line with the company’s historical profitability levels. Also, the company has a positive age-wave related macro-trend likely driving fundamentals and sustained growth, thanks to more baby-boomers becoming retirees, a group that tends to be stronger buyers of RVs, spelling stronger fundamental upside. Finally, while markets are not expecting operational improvements, the company has been able to use their patience in terms of their capital structure to make a smart acquisition and take on new leverage to help give further operational and growth improvement opportunities to the business. All these factors point to fundamental improvements for the business the market is not pricing in.

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